JSW Energy Ltd

NSE:JSWENERGY

Earnings Call Transcript 2023-Q4

[Operator]

Ladies and gentlemen, good day, and welcome to the JSW Energy Limited Q4 FY '23 Results Conference Call, hosted by Antique Stock Broking. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Rohit Natraj from Antique Stock Broking. Thank you, and over to you, sir.

[Unknown Analyst]

Thank you, Robin. Good morning, everyone. First of all, I would like to thank the JSW Energy management for giving us the opportunity to host the post earnings 4Q FY '23 Earnings Conference Call. Today, we have with us from the management, Mr. Prashant Jain, Joint Managing Director and CEO; Mr. Pritesh Vinay, Director Finance and CFO; and Mr. Vikash, Head Investor Relations and Treasury. We will begin the call with the opening remarks from the management, post which we can start the Q&A. Over to you, sir.

[Prashant Jain, executive]

Thank you. Good evening, ladies and gentlemen. The year gone by had been a very, very interesting year for the power sector. We have seen in last 30 years highest ever power demand growth during the year at the rate of 9.5%. This came in on a backdrop of 8.5% power demand growth in FY '22. So this is showing a certain structural change in terms of the power demand growth. .

And as we speak, we saw total capacity in the country at 416 gigawatt, which talks about the total net capacity addition of 16.6 gigawatts, of which majority, which is 15.3 gigawatts was renewable. The important point, what you have to see, is that out of the 16 gigawatt of the net capacity increase, the net generation is close to 4 to 4.5 gigawatt, whereas the net demand increase was approximately 14 gigawatt. That means 9.5 giggwatt of the overcapacity got absorbed and the similar was the situation in the previous year in which also 17 gigawatt was a total capacity addition, of which 15.5 gigawatt was the renewable capacity.

So the point I'm trying to say is that enough net capacity addition is not taking place as compared to the net demand increase in the country, which is also reflecting into the abrupt increase in the power prices into the energy exchanges.

Second thing is also to be seen is that not enough volume is available in the merchant market, too, which is getting cleared. In the last year in the market, the total volume was 51 billion units, which was down by 21% as compared to the previous year and the tariff increased by 36% at INR 5.97 as compared to INR 4.39 previous year.

The thermal coal prices are continuously falling. In the quarter 4, the thermal coal prices came down by 37% on an average of $148. It has been continuously declining in the current quarter also. And in April, average prices were $130. May, it was $118. And as we are speaking, the prices have touched to $102. And on a lower calorific value basis, they are in a double-digit number. So we continue to see the moderating coal prices and power demand is very, very interestingly increasing in a very robust way.

In coming to the company, this year has been for delivering the promises. JSW Energy reported second highest ever EBITDA and second highest PAT ever. The last time we saw 2015 during the high merchant prices and shortage of power. We saw such kind of an EBITDA and also in 2016, we saw the similar kind of a PAT. But in last 7 years, 8 years, this is the highest ever in EBITDA as well as the profit after tax.

Now our business has also transformed as compared to the previous year when at that point of time, about 55%, 60% of the capacity were. We were dependent on the release of the merchant market power demand scenario and supply scenario. Today, 85% of our portfolio is completely tied up. This 85% I'm talking, if I'm considering in capacity also once that get commissioned. And so we have a very strong visibility of our -- all of our cash flows going forward.

In terms of the good development, we have now won 2.4 gigawatt hour of the pump storage bid and 1 gigawatt hour of battery storage bid. These are the 2 projects which we will be constructing. So this is giving us the first-mover advantage into the energy storage space. India is at the inflection point of the energy storage requirement point of view because today, our baseload power demand is 185 gigawatts, whereas the total renewable capacity which is installed at 173 gigawatts.

The movement baseload power demand and renewable capacity equals and renewable capacity overshoots at that point of time, grid will start becoming on a stable and which is going to happen in the next 18 to 24 months' time frame. Because at a time when the sun is at its peak at that point of time, if the renewable power -- all power is coming, at that point of time, you cannot turn down your thermal capacity to 0. That's where the grid storage requirement comes into the play. And CEA has forecasted that by 2030, 322 gigawatt hour of energy storage capacity will be required and in that, the light -- the tenders have started coming in, and we are getting the early-mover advantage and we have already tied up or logged in 3.4 gigawatt hour of the capacity, which is going into the construction. And we will be generating higher than the normative returns in these projects.

And also, we have already secured close to 72 gigawatt hour of the hydro pump storage projects where we have got the allocation, and we are in the process of taking the necessary approval. Of that, this one hydro pump storage will be going into the construction this year.

I'm happy to share also another interesting landmark decision which of our Board has taken today. We are starting the India's largest green hydrogen project, which will be 3,800 tonnes per year capacity. This project will be set up to produce the green steel by JSW Steel at. This project will be tied up using the 100% renewable power, which will be consuming 23 megawatt round-the-clock renewable power. So on an installed basis, it will be approximately 80 megawatts of the renewable capacity, along with the pump storage will be required, storage will be required. This project will get commissioned in the next 18 to 24 months time frame. And this will be on a cost plus mid-teen ROE basis for a 7-year contract during the second year period, the entire plant will be amortized. And post that, it will be on the basis of variable cost and ROE basis between the parties.

This is going to be the largest project in the country, first time for the green steel manufacturing. And the first project where the entire PPA is fully secured. This will be giving us a huge flip and advantage for going forward because we -- as we have spoken in the past that we have created our own micro grid and solar and wind farm capacity along with the pump storage and we will be able to enter into the electron to molecule business.

Additionally, we are also contracting the entire green oxygen, which will be produced, which will be the 8x of the capacity of the green hydrogen that will be also sold to JSW Steel.

The -- another interesting piece, which I want to talk about is solar module manufacturing facility. We had informed during the quarter that we are -- we have got LOI under the PLI scheme by Government of India for 1 gigawatt hour -- 1 gigawatt per year capacity for wafer, cell and module manufacturing facility, for which, we have been allocated at INR 320 crores of the PLI. The total project cost is going to be INR 1,600 crores. In addition to that, we are finalizing the package from the state government. This project will be commissioned in 18- to 24-month period.

This will enable us to completely backward integrate for our own captive requirement of the module manufacturing, wherein we will be able to produce the latest technology modules, solar PV module at the most competitive price, therefore, our positioning will further strengthen to be -- to remain a lowest cost renewable power producer in the country.

The next piece, which I also want to touch upon is about in car we had completed the acquisition of Ind-Barath asset. This is going to be one of the lowest cost completed project, less than INR 4 crore per megawatt pithead plant, including the FGD installation. And the interesting piece is on a cool India linkage prices, this project will be one of the lowest cost -- fuel cost power producers, close to INR 1.30 to INR 1.40 will be the fuel price on a India linkage price.

The first unit is expected to get commissioned in the first half of the current financial year, and the second unit will be expected to commission in the last quarter of the current financial year. And we are seeing that this is going to be hugely value accretive for us. Because of the high merchant power prices, we are expecting that on a conservative basis, we will be making INR 2 to INR 4 kind of a range for the fixed cost recovery, which will be very, very value accretive for this particular project.

We also completed the Mytrah acquisition during the last quarter. This is one of the greatest example and one of the largest acquisition in the renewable space. Originally, we had emphasized that the EV will be INR 10,500 crores. As against that, we completed the transaction at INR 10,150 crores. For an installed capacity of 1,753 megawatts, this translates to INR 5.77 crores per megawatt of the capacity as compared to today's replacement cost in excess of INR 7.4 crores to INR 7.5 crores per megawatt.

The normalized EBITDA of the asset will be INR 1,650 crores, which translates to INR 941 crores per gigawatt. Today, on a competitive landscape, the best bid, which we are winning at JSW Energy, also the per gigawatt EBITDA is around INR 840 crore to INR 870 crores per gigawatt as compared to that INR 941 crores. So that's translated to the hugely value-accretive transaction. We have given a guidance that from a normative -- from an actual EBITDA of INR 1,200 crores, we will be going for INR 1,650 crores in 12 to 18 months time frame, of which INR 400 crore or INR 390 crores to be precise was coming from the generation increase and grid availability and machine availability and INR 60 crores was coming from improvement in operations and maintenance cost.

I'm happy to share that in last 45 days, we have already made up and running 103 wind turbines out of 128 turbines, which were down and balance 25 turbines, they will be also up and running by first week or second week of June. Thereby, we will be getting the generation much, much ahead as compared to earlier entities. Same is the situation in terms of the machine availability improvement, we have already improved the machine availability by 500 basis points. And the performance ratio in terms -- in the solar generation has been also significantly improved. Therefore, we are expecting that the guidance what we had given that 12 to 18 months' time frame will be much, much ahead the schedule. And during the current financial year itself, we will be achieving the normative EBITDA run rate what we had forecasted earlier, which is INR 1,650 crores.

I am expecting on a most conservative basis, this year also as compared to INR 1,200 crores EBITDA last year, we will be doing between INR 1,400 crores to INR 1,470 crores EBITDA in the current financial year because some of the high base season, which is right now going on, will not be available for us for generation.

Now I'm coming to the very important subject, which is our strategy, which we have explained in 2021, wherein we had given a formal guidance that JSW Energy is going to be a 10 gigawatt company by FY '25 and 20 gigawatt company by FY '30. In that particular strategy, we had spelled out that our EBITDA will be going up to 2.5x in 10 gigawatt and at 5x at 20 gigawatt capacity. Because we are doing exceptionally well, we have already locked in 10 gigawatt of the operating capacity, which will be completed in the calendar year 2024. In addition, meeting 1 gigawatt WCM manufacturing facility and also 1 gigawatt hour of the battery storage capacity. Because of this, our cash flows are also improving dramatically, and we are coming out with the enhanced guidance, which will be improved by 25%.

Now our revised Strategy 2.0 is by 2030, we will become a 20 gigawatt generation capacity and 40 gigawatt hour of the energy storage capacity along with green hydrogen facility of 3,800 tonnes per annum and also 1 gigawatt of WCM capacity. All this is without any equity dilution, only from the internal equals.

Also, what we are talking about is that earlier guidance was that by FY '30, we will be having a leverage of net debt to EBITDA of 4x. Now we will be reducing our leverage to 3.5x to 4x and our profit after tax and EBITDA will -- both will go up by 25%. So we are giving a guidance that our EBITDA will be 6 to 6.5x in -- at 20 gigawatt capacity in FY '30 as well as our profit after tax will be 7 to 7.5x, which is also 25% up at 20 gigawatt capacity.

Also, it is important to note that on a achieved the capacity in FY '23 basis, already, we have achieved on a normalized EBITDA of 1.8x and profit after tax at 2x as against what we have guided. So we are quite confident that we are not only doing better, and we will be growing much, much aggressively.

Earlier, we have given a guidance that we will be doing a capital expenditure of INR 75,000 crores. Now this all is envisaging a total capital expenditure of INR 112,000 crores, of which INR 35,000 crores has already been deployed, which will get completed in next 12 to 18 months' time frame.

The important thing, which I am also envisaging and ping up for -- on record that our balance sheet size will grow at 22% CAGR from FY '23 to FY '30, while we are delivering our balance sheet and deploying only our cash flow. And our cash profit yields are going to improve only what we have delivered from here.

With this, I would like to hand over the forum to Pritesh to touch upon the operating performance as well as the gearing ratios and receivable cycle. Over to you, Pritesh.

[Pritesh Vinay, executive]

Thank you very much, Prashant. A very good evening to all of you, and thank you very much for taking time out to join us for our fourth quarter and annual results conference call. .

Prashant already said the macro context in terms of what happened to the broader power markets for the year as a whole. In that context, if I were to briefly touch upon the performance for the fourth quarter and then I'll come to the annual results performance.

If you see the net generation for JSW Energy during the fourth quarter was up by 16% Y-o-Y to over 5 billion units. This was on account of, a, additional renewable energy capacity like the 225-megawatt solar plant and the first batch of the SEC 10 projects that were commissioned earlier in the year as well as higher sales of power on the merchant side as well as the lockdown of.

So from a revenue point of view, on a reported basis, you will see that the revenue for the quarter at INR 2,806 crores was up by 6% Y-o-Y. However, I would like to highlight that in Q4 of 2022, there was a truing up order at JSW Hydro for the custom plant that had come because of which there was a one-off exceptional impact of INR 525 crores included in the revenues. Adjusted for that on a like-for-like basis, the revenue for this quarter on a 16% higher net generation is actually up by 32% Y-o-Y. This is largely on account of the fact that higher fuel prices on a Y-o-Y basis, which led to a pass-through of the fuel cost also impacting that.

Coming to the EBITDA performance. Again, after stripping off the EBITDA for exceptional including the truing up liability of last year, the EBITDA for the quarter stood at INR 881 crores, which was up by 7% Y-o-Y, and the adjusted net profit stood at INR 272 crores for the quarter.

Wrapping up the year as a whole, if you see for fiscal 2023, the net generation was up by 5% at 21.8 billion units. The reported headline total revenues was at INR 10,867 crores, which is up almost 25%. Again, the impact of truing up on hydro stood at last year of almost close to INR 600 crores. So adjusted for that, Y-o-Y, the revenues are up by 33%. EBITDA adjusted for exceptionals for the year as a whole stood at INR 3,817 crores which is up by 5% Y-o-Y. And the adjusted profit after tax after taking off exceptionals, while we are truing up liability acceptance last year, this year, we had an exceptional gain of INR 120 crores in the first 9 months due to reversal of a loan that had been given to a third party in the previous years. So adjusted for that on a like-on-like basis, the adjusted net profit at INR 1,348 crores was up by 15% Y-o-Y. That was on the P&L side.

Now coming to the balance sheet side. And here, I would like to set a few things in context. We completed the Mytrah acquisition on 29th of March 2023. And therefore, the Mytrah assets were available to us from a consolidation for books point of view only for 2 days of the year until 31st March. Whereas the balance sheet is consolidated as of that particular day. So therefore, to make sense out of these numbers, we think that it is important to look at the pro forma basis on a combined basis. So I would request everybody you have access to our presentation which has been uploaded on the website. So if you can please look at Slide #39, which explains the net debt bridge, that would give more clarity in terms of how to interpret the debt levels.

So as of the quarter and 9 months ended December 2022, the total net debt of the company stood at INR 9,840 crores. Of this, INR 6,475 crores was a net debt on the operating companies and another INR 3,365 crores was the project loans drawn for the capital work in progress. During the quarter, if you see the debt from the operating companies went up by about INR 3,500 crores to just INR 10,000 crores. And this incremental debt was largely the balance sheet borrowing that we did at the existing thermal business in order to fund our growth, both for M&A as well as to infuse promoter's equity contribution into the ongoing projects.

So on the operating companies, the net debt stands at roughly INR 10,000 crores. So on an underlying INR 3,800 crores of EBITDA, the net debt to EBITDA for the operating company now stands at 2.6x. The next batch of debt to look at is the debt on the CWIP. So what was INR 3,365 crores has gone up marginally and now stands just north of INR 3,600 crores.

For Mytrah, there's a net debt of close to INR 8,600 crores that has come on to the books. Mytrah, let me spend a few minutes on that in terms of how to look at Mytrah's performance. Prashant already mentioned in his opening remarks that if you look at the pro forma 12-month performance of Mytrah for the year ended fiscal 2023, it stood at about INR 1,187 crores. The headline net debt stood at INR 8,600 crores. However, the EBITDA is not normalized. We have a very active asset optimization and performance improvement plan that Prashant already talked about. They are very encouraging signs. And this has an EBITDA potential of INR 1,650 crores. So INR 8,600 crores of net debt on a INR 1,650 crore normalized EBITDA translates to about 5.2x net debt to EBITDA on the Mytrah business.

So on a combined basis, Mytrah normalized EBITDA plus the existing debt on the operating business, we have about INR 18,500 crores of net debt, which is going to be serviced by EBITDA of close to INR 5,500 crores. And therefore, the combined net debt-to-EBITDA is 3.4x. And if you look at the combined EBITDA, as I said, will be close to INR 5,500 crores for both the businesses for the entire 12 months of fiscal 2024 from a run rate point of view.

So this is on a net debt side, I will also like to take a few minutes on Mytrah's financing itself. This was a very complex transaction and a very landmark and benchmark the refinancing and debt sizing package was put in place immediately. It is very rare typically for large-sized M&As. The typical model is that you do a bridge financing, acquire the assets and then you take between 6 to 12 months to put the permanent capital structure in place. Here, what has happened is this that we consummated the deal on 29th of March, and we drew down the first tranche of the refinancing facility on 31st March itself.

So on Mytrah portfolio per se, while we have talked about the EBITDA improvement, but there's going to be a substantial benefit below EBITDA as well. So there is more than 240 basis points of annualized weighted average interest rate that we have achieved by putting the refinancing and debt sizing packaging into place, which will lead to a close to INR 240 crores to INR 250 crores of savings on the finance cost from a run rate point of view from day 1 itself. That is on the Mytrah financing.

Now I will take another moment to talk about the receivable cycle. I'll break this conversation into 2 parts. One is the JSW Energy portfolio on its own without Mytrah. There, if you see, there's been a very, very encouraging performance there as well. If you look at one of the particular slides that we have on the receivable cycle. At the end of March 31, 2023, in terms of day sales outstanding, the receivables stood at 60 days of sales compared to 63 days of sales. While you will look at a headline absolute rupees crore number is higher, but that is because of the higher fuel cost and therefore the higher revenues that we talked about. So the right metric to look at is in terms of days sales outstanding.

Even within that, if you see the total amount of overdues that stood at the end of the year were about 20% -- close to 20% of the total receivables and we've had very, very healthy collection trends in the last 1.5 months since then. So receivable cycle continues to be healthy. If you look at the micro receivable cycle, that is also a very interesting situation in the investor presentation, we put one full slide on that, slide #8, if you see sorry -- my bad, it's Slide #10.

When we had -- we were submitting our binding bid, this was last year when Mytrah sale process was owned, we had the March '22 audited numbers and Mytrah's receivables outstanding were touching almost close to INR 2,000 crores. In the last almost 12 months since then maybe 14 -- 13 to 14 months is then, we've seen that receivable cycle has come down by close to INR 500 crores during this period. We have put in place a very strong and focused collection efficiency that is also in place. So month-on-month, what we are collecting vis-à-vis what we are billing is consistently high.

If you look at the bottom left-hand chart on this particular slide, that shows for 3 particular months on an index basis, we are collecting between 150% to 220% higher than what we are billing. So we are very confident that we will be able to optimize the receivable cycle of Mytrah portfolio as well to healthy levels within the 12 months which will release a lot of liquidity into the system. And in this context, if you look at the enterprise value that Prashant had talked about, of INR 10,150 crores plus net current assets, this is really going to be a very, very cash accretive transaction for JSW Energy.

So maybe I'll just stop there. And operator, we can open the queue for Q&A.

[Operator]

[Operator Instructions] The first question is from the line of Sumit Kishore from Axis Capital.

[Sumit Kishore, analyst]

I must complement you on the opening remarks and the growth outlook that you have laid out for the company. My first question is in relation to the government, which has given a monthly plan to award -- prestigous award RE capacity fiscal starting FY '24. What do you think is likely that this fiscal? That's my first question.

[Prashant Jain, executive]

It's a tough call for me because we are not concentrating more on these kind of bids as a company because we are still finding that the rates which are getting discovered in these bids are not remunerative for a company like us to undertake the projects and achieve the normative returns what we are targeting. So that's why we are not at all following these bids. So it's a tough call for me.

[Sumit Kishore, analyst]

Also, a follow-up on this given that you are setting up a 1 gigawatt manufacturing facility for modules integrated up to wafers, does that also mean that it is setting up a platform for you to set up at least 1 gigawatt solar capacity at JSW Energy every year thereafter?

[Prashant Jain, executive]

Yes. So we consider that, that kind of a requirement we will be having because most of our requirement, we are contemplating that close to 1.8 to 2 gigawatt of the kind of capacity which we are going to build, which will be both by solar and wind put together and the majority of the capacity, which we will be able to utilize.

[Sumit Kishore, analyst]

Okay. Over the next 3 to 5 years, in addition to the lock-in capacity of 10 gigawatt on the generation side. What visibility do you have on group captive generation projects, which is a requirement from the JSW case of the team?

[Prashant Jain, executive]

So we have made a medium-term plan, and we are looking that we will be having close to 6 gigawatt of kind of a group capital requirement going forward. In addition to that, we are also looking for certain C&I segment. In addition to that, we are also looking for electron molecule business also. So we -- that's how we see that this generating capacity should keep on -- we keep on adding will be primarily within the group captive or C&I customer or certain very attractive tenders where there is not a substantial competitive landscape.

The way we have been building our business is -- it's different kind of energy product segment, which are there. So whether it is battery storage, whether it is pump storage, hydro or solar, wind, thermal, wherever we find a great opportunity to deploy the capital to generate industry-leading returns for the future. In our case, minimum mid-teen returns are most important. That's how we have been deploying our capital and we will be continuing to do that.

In addition to that, we are also scouting inorganic growth opportunities. If any good growth opportunity like Mytrah is available, where we will be getting on a normative equity base, we will be getting north of 16% equity IRR whereas the entire transaction for us is 100% leverage buyout. So on a net worth basis, an entire thing is value accretive for us. But this is how we are contemplating, and we will continue to do that.

[Sumit Kishore, analyst]

Just to clarify the 6 gigawatt number that you said to get C&I is in addition to the 10 gigawatt award locked-in capacity?

[Prashant Jain, executive]

Absolutely. Absolutely. So my guidance, what I'm giving is that we are talking about by FY '30, we are becoming 20 gigawatts of generation. Of that, we are talking close to 6 gigawatts will be a group captive in the next 7 years' time frame, which will be coming up and another 4 gigawatt from various other opportunities.

[Sumit Kishore, analyst]

Sure. My last question is that MOEF has recently approved exemption of pump storage hydro projects from environmental impact assessment. Is it likely to help speed up your project plan in pump storage hydro? How much capital are you likely to commit to pump storage hydro over the next 3 years? And what is the actual balance sheet investment likely over the same time frame?

[Prashant Jain, executive]

Sumit, we -- as I explained that our FY '30 target is around 40 gigawatt hour of the pump storage capacity and -- which means it is going to be close to INR 25,000 crores to INR 26,000 crores of the total capital expenditure we are going to do by FY '30. And first project will be getting into the construction in the current financial year -- end of the current financial year and which we have already locked-in with the Government of Karnataka. So this is how we are seeing.

Second is, the approval side, yes, there are a lot of exemptions which are being provided by Ministry of Environment and Forest in terms of the -- in terms of the geotechnical surveys. So these are really welcome steps and these are really going to help us to to execute the project in a much faster -- at a much faster speed.

I also want to tell you that we are the largest hydropower producer in the country and having the best experience of operating on these assets. For the last 3.5, 4 years, we have been building Kutehr project, which is going to be the fastest ever build the project in spite of Kutehr wave conditions and various other difficulties, which we have built. So we have built the strong execution capability of doing the project which is primarily being done in-house with a small contractor teams, which is making us more and more confident that we are one of the best place to -- in terms of the industry to execute these projects.

[Sumit Kishore, analyst]

Excellent. I have more questions, but I'll get into it queue now. Those are my best wishes.

[Operator]

[Operator Instructions] The next question is from the line of Vivek Ramakrishnan from DSP Mutual Fund.

[Vivek Ramakrishnan, analyst]

Hello. Congratulations on an excellent performance. My question was around the collections at Mytrah. In terms of how do you manage to accelerate and is there a systemic thing that has happened that we in the future also, you'll not see the collections build out? Is this any one-off that has happened because of the government scheme? That's my only question.

[Prashant Jain, executive]

Vivek, thank you for your question. So it's the way we do our business and we take pride in doing that, and that's how we maintain our receivable cycle low for our -- all our existing business also and that same thing we are trying to replicate at Mytrah. Of course, one thing which I want to tell to you as well as all the audience that there are the structural changes, which is taking place in the power sector.

The Government of India has taken various -- very interesting steps, which is helping to recover the receivables. At the same time, we are also having the strong relationship and a very good management of the receivable. And today, if you look at our presence, we are present pan-India and with all kind of a discounts, and we are able to maintain a very low receivable cycle. So I can assure you that this is -- the Mytrah cycle -- receivable cycle will be aligned to JSW Energy performance, and it will be a permanent solution.

[Operator]

The next question is from the line of Nikhil from ICICI Securities Limited.

[Unknown Analyst]

Sir, I've got just one question. So can you explain the economics of the battery storage project because 50% of our capacity will be reserved for second. So how do we plan to utilize the remaining capacity and what will be the cost economics of the storage?

[Prashant Jain, executive]

So the -- in terms of the storage, the first tender, what we have won, we have contemplated 2 opportunities. Number one opportunity is the ancillary market, which has got opened up, and we are seeing very attractive trend in particular ancillary market. And we see that we will be in a position to generate better returns than what we have contracted with SECI.

And second thing is we also have the option to make a bid in any of the energy storage bid, which was going to come in future. So both the options are available to us. But at this point of time, we have considered the ancillary market where the battery storage power will be scheduled in order to maintain the frequency and the demand. So new guideline, which has come up based on which the ancillary market has opened up, and we will be generating much better return than what we have contracted. And later on, we can continue to remain that or we can tie it up in any of the future.

[Unknown Analyst]

Understood, sir. And sir, what portion of our Ind-Barath plant is tied up with?

[Prashant Jain, executive]

We will not be tying it up given the macro situation. So we will keep it in...

[Unknown Analyst]

So 100% will be for merchants?

[Prashant Jain, executive]

Yes. Because this is going to be a very low cost. And if I say that, for example, last year, average tariff for the entire year was INR 5.96. And as I explained on a India linkage price, the fuel price will be INR 1.30. Even if I pay a 100% premium on the Coal India linkage price in the e-auction market, my fuel price will be close to INR 2.20. That means I can make around INR 3.50 as a fixed cost into the merchant market. So we will be keeping this capacity open for some more years. And then as and when we see the macro situation changing, we will be going into the long-term market.

[Unknown Analyst]

Understood, sir. And is the coal tie-up already done with?

[Prashant Jain, executive]

So coal is available under the Shakti linkage scheme. We will be making the bid and also the spot option, which is being done by the NCL. There is enough coal available in and around mines, which can be done either the Shakti scheme or we can do it in the auction. .

[Operator]

The next question is from the line of Anuj Upadhyay from Investec.

[Unknown Analyst]

Sir, a few clarification. On Ind-Barath, you just mentioned that the entire capacities will be set up out of merchants. Kindly correct if I'm wrong, because my earlier assessment was part of this capacity will be tied up towards the model manufacturing side. So is there any change in the...

[Prashant Jain, executive]

Anuj, initially, we were considering that polysilicon capacity is we will set up at Orissa. And that is very -- that's the most important thing in our management agility that we take a decision on a dynamic situation. Right now, the polysilicon market is becoming overcrowded globally. Last year, the total demand was 800,000 tonnes. And now China has -- is putting up a large capacity of polysilicon and in next 12 to 14 months time frame, total capacity will be in excess of 2.5 million tonnes, which is sufficient to use 850 gigawatt out of solar panel.

Last year, the solar PV panel demo was 260 gigawatts because of this polysilicon prices, which were rolling at $42 per kg has come down to $16 per kg and are expected to come down to below $10 per kg. That is why we have taken a decision to not to enter into the polysilicon capacity at this point time and because of which, we have also refrained in participating in scheme for polysilicon to module capacity.

However, when you look at the situation 2 years out, 3 years down the line, but we don't want to be caught on to the wrong cycle. And that's why we are not looking at any polysilicon manufacturing facility at least in the near foreseeable future until this demand and supply situation is favorable to set up such kind of a facility in India. And therefore, the entire capacity will remain open up for the merchant tariff because we are in a position to capitalize in this kind of a scenario.

[Unknown Analyst]

Okay. Just to follow up on this, this capacity of around 2.5 million tonnes if you mentioned, I mean, any -- sorry, for 50 gigawatt. Any time line by when this will be?

[Prashant Jain, executive]

Another 12 to 14 months time frame this all capacity is building up in China.

[Unknown Analyst]

Okay. And on your CapEx plans, you mentioned around INR 75,000 crores of incremental CapEx will now be required over next to 6 to 7 years kind of a time period and for which we won't be diluting anything. Could you just elaborate further on what kind of internal cash flows could or likely be generating so as to fund the equity CapEx -- on capacity And lastly -- so last time...

[Prashant Jain, executive]

One by one because I will forget otherwise, Anuj, because you can ask your question later on. Otherwise, I will forget.

[Unknown Analyst]

Sure, sir.

[Prashant Jain, executive]

Your question is that on the capital expenditure as well as the cash generation. So last year, we had generated close to INR 2,700 crore, INR 2,800 crores of the cash and which is going to go up in the FY '24 and thereafter because our EBITDA is going up very rapidly because from INR 3,800 crores of our EBITDA for the next year will be at least 1.7, 1.8x and that's the similar kind of a situation, which is going to happen which, if you are taking incremental debt on 3:1 debt-to-equity basis, you are in a position of doing the capital expenditure between INR 12,000 crore to INR 13,000 crores per year and which really going up as the cash flow further increases.

Therefore, we will be deploying close to INR 12,000 crores capital expenditure as against what we have unresearlier INR 75,000 crores. Out of INR 112,000 crores, already INR 30 crores, INR 35,000 crores has already been planned like INR 16,600 crores on the capacity expansion of the SECI and group capital project, INR 2,700 crores on the Ind-Barath, INR 1,600 crores is now -- we are talking about for wafer cell manufacturing facility and INR 2,200 crores for the battery storage project. And in addition to that, INR 10,200 crores or INR 10,150 crores is for the Mytrah acquisition. All this put together is translating to around INR 30,000 crores, INR 31,000 crores. So balance INR 3,000 crore, 5,000-odd crore -- or will be spent 2024 through FY '30. This is how it will translate.

[Unknown Analyst]

And lastly, on the green hydrogen, what capacity exactly are looking at and the selling arrangement? I mean, exactly to whom this green hydrogen would be supplied? What kind of PSA of selling agreement we are eying into? Have we already tied up with the...

[Prashant Jain, executive]

Yes. We have already tied up. This capacity is 3,800 tonnes. This will be -- this will be sold on a contract with the JSW Steel. The period is 7 years, the complete plant is amortized period of 7 years. Post 7 years, it will be variable cost plus ROE. It is cost plus mid-teen ROE. It will translate something like approximately between $2, $3.5 per 5G kind of a number on which this will be contracted. And also the entire oxygen will also be contracted. .

[Operator]

The next question is from the line of Dhruv Muchal from HDFC Mutual Fund.

[Dhruv Muchhal, analyst]

If I get it right, you mentioned the group captive itself can give you about 6 gigawatt. That's over a number of the 1 gigawatt that you have already -- that's already in the pipeline, right, sir?

[Prashant Jain, executive]

That's true.

[Dhruv Muchhal, analyst]

And so I understand, so if it's for JSW Steel, they would probably require round-the-clock power. So will this also be accommodated along with probably some hydro, which can also drive some additional investments or battery storage or that's just a thinking of?

[Prashant Jain, executive]

You are absolutely right. In addition to that, there will be the storage facilities also.

[Dhruv Muchhal, analyst]

And it's safe to assume that a large part of this will be on, I mean, what we can say, regulated ROE kind of returns basis?

[Prashant Jain, executive]

Absolutely.

[Operator]

We have the next question from the line of Mohit from ICICI Securities.

[Unknown Analyst]

My first question is on the guidance where you are talking about 3 -- 3 or 3.5x EBITDA, normalized EBITDA, normalized PAT. Can you just clarify what is normalized EBITDA and normalized PAT for FY '23?

[Prashant Jain, executive]

Pritesh, would you like to take?

[Pritesh Vinay, executive]

I'll do that. Mohit, I don't know if you joined a bit late, but I'm happy to walk you through that again. It's very simple. INR 3,820 crores is our own EBITDA and the rounding of excluding Mytrah to that to add the normalized EBITDA of Mytrah, which is INR 1,650 crores, right? So that gives me INR 5,470 crores. That is the normalized EBITDA, yes?

[Unknown Analyst]

Okay. And the PAT?

[Pritesh Vinay, executive]

PAT, you have to drive. You know my -- on INR 3,820 crores, what is the PAT that we have done. And you will be that with INR 1,650 crores of EBITDA, what will be the -- there's a INR 8,600 crores of net debt. So you will be able to derive Mytrah at a roughly 25% tax paying portfolio. So you'll be able to have what will be that normalized fact.

[Unknown Analyst]

Second question is on the solar module and the plant. Have you finalized the technology? And have you given the equipment order and when we expect this capacity on value? And how is planning to source for silicon inside India or from the side India?

[Prashant Jain, executive]

So this facility will be set up in the state of Rajasthan. We have already closed the technology. It will be a top con technology. And the equipment ordering is in the final stage, and polysilicon will be sourced from China because that's the only place which is manufactured at this point of time other than Europe and U.S. and small capacity in Korea. And in India, nobody is producing, and we don't know when it is available and this facility will be up and running in 18 months time frame.

[Unknown Analyst]

Okay. Do you think that on the time your ambition is sort of managing and the largest his to polysilicon?

[Prashant Jain, executive]

So we will take it step by step. And we see we don't see ourselves into the module manufacturing and third-party business. We are contracting only into the energy and its derivative products, which is electron to molecule business and storage products, that's where we are concentrating. Whatever we are doing a backward integration, whether in terms of PV cell manufacturing or other segments, which we have talked about like in wind licensing deal and other thing is only to save our supply chain cost. We want to be we are, and we want to remain the lowest cost power producer and we want to remain at that competitive advantage.

In order to retain that advantage and be competitive, we are working on the supply chain side, but we do not want to deploy our capital for third-party manufacturing and getting into those kind of a business because these are -- we don't know how they are to pan out in the future. So we want to concentrate our capital employment only for the segment where we are efficient and we want to concentrate.

[Unknown Analyst]

Sir, In hydrogen, I see that we have taken some from the company of Karnataka about ammonia. So is it -- are you going to limit our green hydrogen in the foreseeable future? And have you identified the technology is you're going to put up to gren hydrogen? And does anything of this has to do with the?

[Prashant Jain, executive]

So it is nothing to be the that the agreement has expired, number one. Number two, we have explained in the detail about our readiness to enter into the electron to molecule business, but we need to -- you need to understand that at this point of time, globally, there is no ecosystem for green ammonia, green hydrogen, the long-term contracts, transportation arrangement, everything is being worked out.

In that kind of environment, everything is a plan, but we are going ahead and executing a project by tying up for production of the green steel. So we have all the resources in place. So our existing contract with the JSW Steel for a 1 gigawatt or in from their 25-megawatt of the round-the-clock power will be taken will be used to produce green hydrogen. We have already finalized the technology. The final equipment ordering is in a final stage. Post this approval from the Board by both the companies, we will be entering into the contract with the equipment suppliers and get this up and running in next 18 months time frame.

We are -- we will be deploying not only to the green ammonia, but also to the CO2 capture making the green methanol, sustainable aviation fuel, green chemical complex, all that we have been working, but those things are some time away as soon as the complete ecosystem is well developed. While those things are under development by various Indian policymakers as well as global policymakers and transportation and port ecosystem, railway ecosystem is getting developed, we are putting a step into the right direction and creative a first-mover advantage into the green hydrogen space.

[Unknown Analyst]

May I ask, is it alkaline technology?

[Prashant Jain, executive]

Yes. So it will be alkaline technology. .

[Operator]

We have the next question from the line of Atul Tiwari from Citi Group.

[Atul Tiwari, analyst]

Sir, just Ind-Barat coal supply situation. So does it already have a linkage with Coal India or the linkage is yet to be tied up because you mentioned INR 1.2 to INR 1.4 in kind of?

[Prashant Jain, executive]

No, no. I said I was trying to give you the competitive landscape. So on a Coal India linkage prices, you cannot sell into the merchant market. So you have to sell into the merchant market, either you get the coal you take into the Shakti B2, which is the quarterly option or the. These are the 2 only opportunities in which you can source the coal wherein you have to pay the premium over and above the Coal India linkage prices. And how I explain you the competitive landscape even if I am paying 100% premium, what will be the variable cost and what will be the selling price. So that's how I explained to you.

[Atul Tiwari, analyst]

Okay. So even at the 100% premium in the fuel cost will not be more than INR 1.2 is what...

[Prashant Jain, executive]

No, no. I said with the with 100% premium, the fuel price will be in the range of INR 2.25 to INR 2.30 at -- because INR 1.30, INR 1.40 is without the premium. So there the royalty as well as the clean energy set will not be changing when I'm paying the premium. .

[Operator]

The next question is from the line of Rohit Natarajan from Antique Stock Broking.

[Unknown Analyst]

Sir, my first question is on the Battery Energy Storage Solutions part. The one that we have got in LOA, you say the capacity charge, you get probably 1 million per megawatt per month, and it works for 2 cycles. Can you explain us the remaining 5% that is going to be sold into the open market? How will that IRR would look like? And how much will be the leverage cost of storage that you have in mind?

[Prashant Jain, executive]

So on a -- so the return on the ancillary market where -- which I explained in the previous question, will be close to or better than what we are having into the SECI contract. On an overall basis, we are expecting that we will be doing better than the mid-teens equity IRR on this particular.

[Unknown Analyst]

Okay. Just to know the split between the battery package and the BOS charge, how does it look like? Is it like $130 per for per unit and what the BOS is $170 per unit, how does that use split looks like at this point in time?

[Prashant Jain, executive]

I would not -- I would refrain to give you those kind of numbers at this point of time. I hope you understand that it's -- it's -- these are new developing projects and developing trends. And -- but -- we have explained to you that our overall project cost as well as we have talked about that what kind of equity IRR, we will be developing -- getting. But however, in some time as the technologies are getting mature and this market deepens, we will be happy to share those kind of a number.

[Unknown Analyst]

Sure. From -- on the hydro pump storage perspective, what is the constructive of commissioning time line that one should realistically look at for all the projects that you have in pipeline?

[Prashant Jain, executive]

So all the projects, it takes -- once you get the PPA signed up and all the statutory approvals are in place, it typically takes between 36 to 48 months kind of a time frame. This is -- these are very simple projects because here, there are no tiling. There are only upper and you have to make one powerhouse and a steel stocks. So these are the very ample projects. Government is also facilitated in very expressed approvals in these kind of projects. So post statutory approvals and PPA, 36 to 48 months is a safe time to consume.

[Unknown Analyst]

Is there a peaking tariff number that you have in mind when these PPAs are signed?

[Prashant Jain, executive]

So these are the different construct than the peak in tariff and other things. These are basically lease kind of the contracts which are being done. So I'm not concerned that you are using for 1 cycle, 2 cycles, 3 cycles, depending upon the requirement of multiple cycle, which the grid or the utility who is taking it on a lease can utilize based on their particular requirement. So we are not concerned on that. So it's a build, own and operate and lease back.

So my responsibility is to build a project, guarantee a particular efficiency and maintain a particular availability. After that, what price, what time cycle the power is coming and what kind -- what is the cost at which the utility is using is depending upon them. Some may be using the absolute free power, some may be using some purchase power. So it depends on the utility to utility, grid to grid. So this is how the business is going to be in over a period of time.

Can we take the last question, please? .

[Operator]

Yes. The last question will be from the line of Sumit Kishore from Axis Capital.

[Sumit Kishore, analyst]

Pritesh, one question for you. What is the weighted average cost of debt that we should use for FY '24? And what is your strategy going forward in terms of the incremental debt that you take? Is there -- is it all going to be local borrowings? Or do you have a mix of local and foreign borrowing?

[Pritesh Vinay, executive]

So Sumit, a very interesting question. So if you -- it's easier to talk about the weighted average interest rate where we are already there. It's already there in the presentation. If you see we were at 8.36% at the end of March. If you were to look at the weighted average portfolio post implementation of the debt sizing and the full drawdown of the refinancing at Mytrah, that should be closer to a print of between 8.5% to 8.6%. So overall, you're looking at closer 8.45% on a weighted average portfolio basis on a run rate point of view, right?

Now I would -- if I were to hazard a guess for the next year, now the underlying assumptions are, are we at the peak of the reported cycle. Do you think the bank MCLR catch up to the repo rate increase is done or how much more legs are left to that, giving some kind of thought to that type of thing. From being from a worst case point of view, I would expect possibly another max 15 basis points increase compared not beyond that.

[Sumit Kishore, analyst]

8.55% ,8.60%?

[Pritesh Vinay, executive]

That's right. So maybe 8.6% is where we should kind of land up, but this is with these kind of underlying assumptions behind and if any of these assumptions change back with

[Sumit Kishore, analyst]

And incremental debt that is...

[Pritesh Vinay, executive]

Yes. The second part of your question is, so far, if you look at our financing philosophy, -- as far as the growth projects, the organic growth projects are concerned. In our entire portfolio, we have gone for a 100% long-term project financing, depending on the nature of the project, et cetera, with a do-to-door tenor of, say, 20 years, average life of between 16 to 17 years. and they have been done at very, very fine and tightened interest rates given the JSW's credit standing in the bank loan market.

And therefore, by an extension of that given the favorable INR liquidity and rates environment vis-à-vis the FX markets, we have been 100% dependent on INR markets. Incidentally, if you recall, 2 years ago, we had done a green dollar bond offering and that was precisely with this due to low levels of rates on a hedged basis for the next 10 years because one was anticipating a tightening of the rise market. So that is a very good call in hindsight. So going forward, you're asking about what is the mix going to be likely be the way it appears, at least in the near to medium term, it appears that the INR market is still likely to be much more favorable from rates, from credit spread point of view, vis-à-vis whatever limited visibility we have from an FX denominated market.

So I would, again, hazard guess that INR liquidity is going to be the way forward, at least for the next 12 months or so. And whatever feelers we have, as we bag more bits, we are actually inundated with more other banks wanting to come and have an exposure to our growth projects, then we are able to accommodate. So that's where we are right now.

[Sumit Kishore, analyst]

Okay. Okay. My next question is -- so more from your Indura project, would you also bring the output electricity to the electricity exchanges? Or would it be more of bilateral contracts -- and similarly, in on storage highly strategy also entail meeting -- managing the peak demand requirement and the higher prices. So would you bring power on the electricity exchanges in both these projects, the merchant thermal project being set up today or being commissioned after the being shut down and some storage site.

[Prashant Jain, executive]

So we do not envisage we say that we will be setting up any merchant or any merchant pump hydro capacity. is a simple opportunity for us where there was a PPA, which at the time of the making a bit, but we could not revise that particular PPA. And the macro situation is transforming. So that's why we are trying to take the advantage being an agile company in terms of the business environment and to create the shareholder value.

I want to make it very clear that all the projects going forward or whatever investment will be in long-term tied up business, and this is how we want to play. But there are certain things which happen in certain constructs where we see a huge economical value part of the capacity could happen, like, for example, if a building like we are having a project of 1,500 megawatt in, 2 projections, 1 project of similar kind of capacity are in the Southern estate. Now that will be giving us close to 12 gigawatt hour of the storage capacity on an 8-hour storage.

Now if I'm getting a bit which is for 6 gigawatt or 7 gigawatt, and I tied up and then another big 3 gigawatt and then my 3 gigawatt capacities open while I'm constructing the project and have commissioned the project, I can play into the peaking market. But as soon as I am able to tie that up, I would like to tie it up. However, we will not be building any capacity which is purely based on the merchant. It could be some incidentals which where we can play a certain capacity strategic basis for some period, but we would not tie up as much as 100%.

[Sumit Kishore, analyst]

My last question is the 72 gigawatt power that you have tied up in age hydro. Maybe in 3 to 4 years, how much approval on environmental and other approvals, project approvals, do you expect to complete in the next 1 years, 2 years, 3 years? If you could give some sort of understanding?

[Prashant Jain, executive]

So approval basis, you can see we reasonably assume that in next 18 months time frame, we will have all approvals in all the projects. However, in terms of the execution and capital deployment side, we are only talking 50% of that by FY because we need to really see how much bids come, whether they will be on a competitive landscape, plus the capital requirement plus execution issues. So that's how you can see.

[Operator]

I would now like to hand the conference over to Mr. Rohit Natarajan for the closing comments. Over to you, sir.

[Unknown Analyst]

We thank the management for giving us this opportunity. Before we close the call, I would like to ask the management at wish to make any closing remarks.

[Prashant Jain, executive]

No, I think that's all. In case you have any questions, please feel free to contact our Investor Relations department at any point of time. Thank you.

[Pritesh Vinay, executive]

Thank you very much.

[Prashant Jain, executive]

Thank you.

[Operator]

Thank you. On behalf of Antique Stock Broking, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.